COURT FILE NO.: 125/19 & 142/19

DATE: 2019-12-20

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE CORPORATION OF THE CITY OF ORILLIA

Applicant

– and –

METRO ONTARIO REAL ESTATE LIMITED

Respondent

AND BETWEEN:

METRO ONTARIO REAL ESTATE LIMITED

Applicant

– and –

THE CORPORATION OF THE CITY OF ORILLIA

Respondent

Robert Wood and Simon Fung, for the Applicant

Krista Chaytor and Caitlin Steven, for the Respondent

Krista Chaytor and Caitlin Steven, for the Applicant

Robert Wood and Simon Fung, for the Respondent

HEARD: December 6, 2019

conlan j.

I. Introduction

The Parties

[1] There are two Applications before the Court, both of which were argued at Owen Sound on the same day in December 2019.

[2] In Court File No. CV-19-125 (“Application”), the Applicant is The Corporation of the City of Orillia (“City” or “Orillia”, both used interchangeably herein as the facta filed by the parties use both terms), and the Respondent is Metro Ontario Real Estate Limited (“Metro”).

[3] In Court File No. CV-19-142 (“Counter-Application”), Metro is the Applicant, and Orillia is the Respondent.

The Facts Not in Dispute

[4] Counsel for both parties have done a tremendous job with their written materials filed with the Court, and, as the beneficiary of that, I have borrowed rather slavishly from the work of the lawyers.

The Application

[5] The following is taken from paragraphs 1 through 5 of the City’s factum in support of the Application, dated November 6, 2019 (all references omitted). None of what appears below is controversial.

1. The Corporation of the City of Orillia (the “City”) is the owner of the lands municipally known as 70 Front Street in the City of Orillia. Metro Ontario Real Estate Limited (“Metro”) is the tenant of one building (the “Premises”) on the lands and the City is the landlord.

2. The City and Metro are both the assignees of a lease dated August 10, 1978 (the “Original Lease”), as amended by agreement dated September 30, 1999 (the “Lease Amendment”).

3. Article III of the Original Lease provided

a. the Original Lease would have a term of 25 years, expiring on February 28, 2004 if not renewed;

b. the tenant had the option to renew the Original Lease for five successive renewal periods of five years each, yielding a maximum term of 50 years and an expiry date of February 28, 2029; and

c. the maximum term of the Original Lease would be 50 years notwithstanding that the tenant may have exercised an option that would otherwise have extended the term beyond 50 years.

4. On September 30, 1999, the parties who are that time were the successors in interest and assignees of the Original Lease entered in the Lease Amendment. The Lease Amendment reflected a agreement for construction of an addition to the grocery store (in paragraph 1), and included terms related to the Original Lease term and certain “option” provisions:

a. the tenant agreed to construct a 10,676 square foot addition to the building on the Premises (the “Addition”);

b. the landlord agreed to pay to the tenant a $63.00 per square foot construction allowance towards the cost of constructing the Addition, which totaled roughly $672,588;

c. in paragraph 4 the tenant agreed to pay rent of $11.07 per square foot for the area of the Addition, compared to rent of $6.65 per square foot for the area of the original building;

d. in paragraph 2 the parties agreed to “extend” the term of the Original Lease by 10 years from “from the date that it would otherwise expire”, i.e. from March 1, 2004 to February 28, 2014 (“Term Extension Paragraph”)

e. the parties agreed to a paragraph 3 that dealt with “options” (the “Further Renewal Paragraph”); and

The Tenant has the option to further extend the term of the Lease for three (3) additional periods of five (5) years each, for a total of five (5) options of twenty-five (25) years, if all remaining options are exercised. The Tenant may exercise its options in the same manner as provided in the Lease.

f. in paragraph 6 the parties agreed that the Original Lease was deemed amended “wherever necessary to give effect to the foregoing.”

5. A dispute has arisen between the City and Metro as to whether the parties to the Lease Amendment intended for the Term Extension Paragraph and Further Renewal Paragraph (collectively known as the “Disputed Paragraphs”) to extend the maximum potential term of the Original Lease such that it has a potential expiry date of either February 28, 2044 or February 28, 2039, instead of February 28, 2029.

[6] Attention should also be paid to paragraphs 5 through 10 and 13 through 17 of Metro’s factum in opposition to the Application, dated November 27, 2019 (all references omitted). Again, the following is not contentious.

5. On or about August 10, 1978, L & D Investments Limited (the “Original Landlord”), as landlord, and Steinberg Inc., as tenant, entered into a lease for certain premises within a shopping centre (the “Original Lease”).

6. On or about February 26, 1995, Metro (then named A&P Properties Limited) became the tenant under the Original Lease.

7. As of September 30, 1999, La Prima Investments Limited, Leah Rose Gilbert, Bernard Gilbert and Rachel Weisman (collectively, “La Prima Investments”) were the successors-in-interest to the Original Landlord and the landlord under the Original Lease.

8. On or about September 30, 1999, Metro and La Prima Investments entered into an agreement to amend the Original Lease (the “Lease Amending Agreement”, together with the Original Lease, the “Lease”).

9. More than sixteen years after the Lease Amending Agreement, on or about January 22, 2016, Orillia acquired title to 70 Front (as defined below) and became the landlord under the Lease.

The Leased Premises, the Triangle Land and the Shopping Centre

10. The Lease is for premises located at 70 Front Street North, Orillia (the “Leased Premises”, including the Addition, as defined below). Metro operates a grocery store at the Leased Premises through an operating company.

The Renewal/Extension Options in the Lease

13. The initial term of the Original Lease was a 25 year term commencing March 1, 1979 and expiring February 28, 2004 with “5 successive renewal periods of 5 years each” that would renew/extend the term to February 28, 2029.

14. On or about September 30, 1999, Metro and La Prima Investments entered into the Lease Amending Agreement.

15. The Lease Amending Agreement extended the term of the Lease. Sections 2 and 3 of the Lease Amending Agreement read:

The term of the Lease is extended from the date that it would otherwise expire for a further term of ten (10) years commencing March 1, 2004 and expering on February 28, 2014.

The Tenant has the option to further extend the term of the Lease for three (3) additional periods of five (5) years each, for a total of five (5) options or twenty-five (25) years, if all remaining options are exercised. The Tenant may exercise its options in the same manner as provided in the Lease.

16. Section 6 of the Lease Amending Agreement provided that the Lease was amended, wherever necessary, to give effect to the terms of the Lease Amending Agreement.

17. The Lease Amending Agreement permitted Metro to expand the Leased Premises at its cost by building an addition of 10,676 square feet (the “Addition”). La Prima Investments agreed to pay Metro a construction allowance of “up to an aggregate maximum of Sixty-Three ($63.00) Dollars per square foot of gross leasable floor area of the Addition…” (approximately $672,588). Metro actually spent approximately $3.471 million on the Addition in or about 2000.

[7] The Original Lease contains the following clauses related to its duration: sections 3(1), 3(2), and 3(3), which can be found at page 45 of the City’s Application Record dated November 6, 2019.

INITIAL TERM

3.(1) TO HAVE AND TO HOLD the Leased Premises for and during a period of 25 years and nil months commencing on the first day of March, 1979, reserving unto the Landlord the right to enter upon the Leased Premises from the date of this lease until the Occupation Date for the purpose of constructing the Store and all other buildings and improvements in the Shopping Centre in accordance with this lease.

RENEWALS

3. (2) The Tenant shall have the options to renew this lease for 5 successive renewal periods of 5 years each. Each such option shall be deemed to have been exercised by the Tenant unless within the period of 12 months prior to the date on which the Term, except for any subsequent renewal under this section 3(2) would otherwise expire the Tenant has given notice to the Landlord that it has elected not to renew this lease. Each such renewal shall be at the Minimum Rent and shall otherwise be subject to the same covenants, obligations and agreements and be upon the same terms and conditions as contained in this lease except for any right of extension or renewal beyond the last such renewal.

MAXIMUM TERM

3. (3) If the exercise of an option to renew shall result in the Term exceeding a period of 50 years, then notwithstanding the provisions of section 3(2), the Term shall expire on that date which is 50 years after the date which is the earlier of the Occupation Date or the commencement date of the Term.

[8] The Lease Amendment or Lease Amending Agreement (referred to both ways in the parties’ facta) contains the following clauses related to the duration of the lease: section 2, section 3, and (possibly) section 6, all of which can be found at page 88 of the City’s Application Record dated November 6, 2019.

2. TERM

The term of the Lease is extended from the date that it would otherwise expire for a further term of ten (10) years commencing March 1, 2004 and expiring on February 28, 2014.

3. RENEWAL

The Tenant has the option to further extend the term of the Lease for three (3) additional periods of five (5) years each, for a total of five (5) options or twenty-five years, if all remaining options are exercised. The Tenant may exercise its options in the same manner as provided in the Lease.

6. EXISTING LEASE

The Lease is amended wherever necessary to give effect to the foregoing and the Landlord and Tenant confirm that the Lease as so amended remains in full force and effect.

The Counter-Application

[9] Additional facts, none of which is controversial, all related to the Counter-Application, are set out below, taken from (i) paragraphs 11 through 13, 22 through 27, and 32 through 40 of Metro’s factum in support of its Counter-Application, dated November 6, 2019 (all references omitted), and (ii) paragraph 51 of Metro’s factum in opposition to the Application, dated November 27, 2019.

11. The Leased Premises are part of the shopping centre known as 70 Front Street Plaza and described in Schedule “A” to the Original Lease. Schedule “A” to the Original Lease reads:

FIRSTLY:

ALL AND SINGULAR that certain parcel or tract of land and premises situate, lying and being in the City of Orillia, in the County of Simcoe and being composed of Lots 7 to 11 inclusive, and part of Lots 5 and 6, on the east side of Front Street, according to registered Plan Number 8, and part of the Water Lot in front of Lot 8, Concession 5, in the City of Orillia which lands are designated as PARTS 1, 2 and 5 on a plan of reference filed in the Land Registry Office for the Land Registry Division of Simcoe (No. 51) as Reference Plan 51R-7773.

SECONDLY

ALL AND SINGULAR that certain parcel or tract of land and premises situate, lying and being in the City of Orillia, in the County of Simcoe and being composed of part of the Water Lot in front of Lot 8, Concession 5, in the City of Orillia, which lands are designated as PART 3 on a plan of reference filed in the Land Registry Office for the Land Registry Division of Simcoe (No. 51) as Reference Plan 51R-57773.

12. As of the commencement of the Lease, the lands described firstly in Schedule “A” to the Original Lease (“70 Front”) were owned by the Original Landlord. The lands were described secondly in Schedule “A” to the Original Lease (the “Triangle Land”) were owned by Orillia and leased by the Original Landlord pursuant to a lease dated July 12, 1978 and amended on or about November 16, 2978 (the “Triangle Land Lease”). The Triangle Land Lease was registered on title to the parcel register for the parcel of land that includes the Triangle Land.

13. The Shopping Centre (as defined in the Lease) is comprised of both 70 Front and the Triangle Land.

The Triangle Land

22. The Triangle Land is a piece of land at the northern tip of the Shopping Centre.

23. As outlined above, the Original Landlord leased the Triangle Land from Orillia for a period of fifteen years expiring on July 15, 1993, but continuing on a year to year basis. Orillia was the owner of the Triangle Land when it acquired 70 Front and became the Landlord under the Lease. Orillia is still the owner of the Triangle Land.

24. The Triangle Land has been used as part of the parking area for the Shopping Centre, pursuant to the Triangle Land lease, and forms part of the Shopping Centre, pursuant to the Original Lease. Section 6 (6) of the Original Lease reads:

The Tenant acknowledges that the leasehold interest of the Landlord in that portion of the Shopping Centre Secondly described in Schedule “A” pursuant to a lease dated July 12, 1978 and registered in the land Registry Office for the Land Registry Division of Simcoe on August 14, 1978 as Instrument No. 645637 as amended by an agreement dated November 16, 1978 expires on July 14, 1993 or such earlier date as provided in the said lease. The Landlord agrees to acquire ownership of the demised lands if permitted or entitled to so do under the terms of the said lease, to maintain the said lease in good standing, and to exercise each right of renewal thereof that falls within the Term.

25. At the time Orillia acquired 70 Front in January 2016, the Triangle Land Lease was in existence and the Triangle Land was part of the Shopping Centre.

26. The Triangle Land is also used for and is required for access to Metro’s two loading docks located at the rear of the Leased Premises:

a) To access the first loading dock, trucks must enter the parking lot from Neywash Street, drive behind the Leased Premises, and reverse to line up with the loading dock. Trucks must then drive behind the Leased Premises and the building at the Shopping Centre and exit the parking lot at Mississauga Street East.

b) To access the second loading dock, trucks must enter the parking lot from Mississauga Street East, drive behind the building at the Shopping Centre and the Leased Premises, and reverse to line up with the loading dock. Trucks must then drive behind the Leased Premises and exit the parking lot at Neywash Street.

27. The Entrance/exit to the parking lot at Neywash Street is on the Triangle Land. By using the Triangle Lands, trucks are able to access the loading docks because they are not forced to turn around in the parking lot or drive across areas that pedestrians must cross to access the Leased Premises, Shopping Centre, or areas of the parking lot where customers or visitors park their vehicles.

The Parking Facilities

32. Starting in or around July 2016, Metro began contracting Orillia about problems with the Parking Facilities and inquiring as to whether Orillia would be removing all existing asphalt and resurfacing the Parking Facilities.

33. In September 2016, Metro advised Orillia that the “asphalt is cracked all over” and that “no localized repair can ensure this parking lot is safe”.

34. In a report dated March 16, 2017, Edison Engineers Inc. concluded that the Parking Facilities needed to be replaced (the “Parking Facilities Replacement Report”). The Parking Facilities Replacement Report states, among other things:

The parking lot pavement has reached the end of its service life. There is severe deterioration throughout all areas of the parking lot. In our opinion, localized patch repairs or mill and overlay will not be effective means of repair due to the extent of current deterioration. Full resurfacing or replacement is required.

35. The Parking Facilities Replacement Report recommended that minimal patch repairs “be completed immediately to patch all potholes since these present a safety concern for pedestrians and vehicles” and that a full depth replacement was the best long term solution.

The Roof

36. Starting in or around December 2016, Metro began experiencing problems with leaks in the roof at the Leased Premises. Metro has had to replace the majority of the ceiling tiles due to the leaks.

37. In a report dated March 13, 2017, Metro’s roof consultant concluded that the roof at the original Leased Premises needed to be replaced (the “Roof Replacement Report”). The Roof Replacement Report noted that the roof at the original Leased Premises was approaching the end of its serviceable life and that the roof membrane had defects that were the likely source of the leaks and that would continue to grow and increase the risk of leakage.

38. The Roof Replacement Report offered two solutions:

(a) A “roof overlay” strategy that would remove the metal and membrane flashings and the existing roof membrane down to the existing insulation, but would salvage the existing insulation. The Roof Replacement Report stated that if this approach was completed within a one year period, then “general roof renewal can be deferred by about 15 to 20 years”; and

(b) A full roof replacement strategy that would remove the existing roof down to the structural steel deck and replace it with all new materials. The Roof Replacement Report stated that this approach would need to be completed at the time leakage surpasses tolerance levels, which is anticipated to be within three years.

Orillia Failed to Replace the Parking Facilities and Roof as Required under the Terms of the Lease

39. On March 24, 2017, representatives of Metro and Orillia met at the Leased Premises to discuss the issues with the roof and the Parking Facilities, among other things. Orillia was provided with copies of the Roof Replacement Report and the Parking Facilities Replacement Report.

40. Metro’s position on the replacement of the roof and Parking Facilities was summarized in a letter to Orillia dated March 28, 2017 (the “March 28th Letter”). The letter stated, among other things:

Both [the Roof Replacement Report and the Parking Facilities Replacement Report] indicate replacements of the Tenant’s roof and parking lot are the only viable alternatives since they are both beyond their useful life. As we emphasized to you at our meeting, we are beyond the point where repairs to the roof and parking lot are a viable option and replacement of both is the only solution to resolve this matters.

You have indicated to us that the City of Orillia has a process to approve for these replacements requires [sic] the approval by City Council. However, we already have a lease agreement in place with you with explicit mechanisms to ensure that the necessary work is completed in a timely fashion.

Our current information is that May 1, 2017 is the next date City Council is meeting where these necessary replacements can be considered and approved. If approved, tendering both jobs would likely take several months such that work would likely only start in July, 2017 assuming all goes smoothly.

Metro simply cannot wait that long for a roof and parking lot replacement. We expect Landlords to react quickly to meet their lease obligations, especially when such serious problems are present. As you saw when we met on site on March 24, 2017, we are taking preventative measures with tarps above the ceiling tiles until such time as the roof can be addressed and this is not a tolerable or safe situation. We are planning on spending $7,000 on another roof repair as a band aid solution so that our customers remain safe. We are not prepared to continue with band aid solutions.

Please let us know your plans to deal with the parking lot and roof replacement at your earliest opportunity. As you can glen from this letter, we cannot wait for your internal municipal process to runs [sic] its course before the necessary replacement work begins.

51. The first solution set out in the Roof Replacement Report (the “roof overlay” strategy) was not completed within one year, as recommended.

[10] Also, the reader is directed to these paragraphs of Orillia’s fresh as amended factum in opposition to the Counter-Application, dated November 28, 2019 (all references omitted), again non-contentious: 15 [excepting subclause (f) which is more argument than fact], 16 (the first two sentences only), and 17 through 22 (the latter paragraph 22 contains some interpretive argument, however, it is so inextricably linked with the remainder of the clause that it must all be set out below, for convenience sake).

Triangle Lands Issue

15. The City agrees with the facts asserted by Metro’s affiant Mr. Lawlor at paragraphs 9-14 and 34-37 of his affidavit sworn October 24, 2019. The key facts within those paragraphs are that:

a) the “Triangle Land Lease” with L&D Investments Limited (“L&D”) as lessee, was executed in July 1978, and the original 1978 Lease (the “Original Lease”), with L&D as landlord, was executed in August 1978.

b) Article VI of the Original Lease makes clear that the landlord has only a leasehold interest in the Triangle Land, and section 6(6) expressly identifies the Triangle Land Lease and its expiration date;

c) The Triangle Land is not included within the definition of “Leased Premises” or “Store” under the Original Lease;

d) Paragraph 11 of the Triangle Land Lease allowed the City to terminate the Triangle Land Lease if the City required the land for road re-alignment purposes;

e) Paragraph 14 of the Triangle Land Lease provided that the lessee could not assign the lease or sublease the Triangle Land without the City’s consent; and

16. In 1980, the City’s elected Council enacted a by-law to approve the assignment of the Triangle Land Lease from L&D to La Prima, its successor in interest as owner of the Shopping Centre, and a sublease from La Prima back to L&D for a term of 10 years. Council never approved another assignment or sublease of the Triangle Land Lease.

Parking Facilities Issue

17. Metro tenders evidence that, in July 2016, six months after the City acquired title to the Shopping Centre site, Metro began asking the City to replace the asphalt on the parking lots around the Metro store. These requests reached a crescendo in March 2017. Metro’s affiant Mr. Lawlor alleged that “Orillia has not taken any steps to replace the Parking Facilities” but the record shows that, in September or October, 2017, the City performed significant repair to the asphalt in front of the main entrance to the Metro store, and instituted a monitoring and pothole repair program that continues today. Those steps were consistent with some of the recommendations in the “Parking Facilities Replacement Report” tendered by Metro, which was written in March 2017 (but Metro’s expert witness did not attend the site visit upon which the report is based). The City is not aware of Metro lodging any complaint about the condition of the parking areas since mid-2017.

18. Metro’s Parking Facilities Replacement Report recommended several options that varied in terms of how much cost and effort would be required on the part of the City, and the likely longevity of the improvement. The City selected its approach to maintaining the Parking Facilities based on a variety of considerations, including the likelihood that the Metro site might be renovated or re-developed in the near future.

19. In September and October 2017 the City spent roughly $30,000 to repair 16,000 square feet of the Metro parking lot using a “mill and resurface” technique. The City’s “mill and resurface” technique was consistent with the “mill and overlay” technique described by Metro’s roof consultant Edison at section 1.3.4 of their report (page 206 of the application record). Edison says that the “mill and overlay” approach can be expected to “buy another 8-12 years before full replacement becomes desirable.” The result of the City’s repair as of October 2017 is shown in the photo attached as Exhibit “N” to Mr. Sugden’s affidavit sworn November 8, 2019. Mr. Sugden visited the site on November 8, 2019 and observed that the asphalt repair on that day looked like it did when the work was first completed in 2017. The alternate “full replacement” of the Metro parking lot was expected to cost the City $400,000.

Roof Issue

20. Metro complained about roof leaks starting in December 2016, through January 2019. Metro asserted that the City was responsible under the Lease for replacing the roof. The City understood that Metro had some responsibility under the Lease for maintaining the roof, and Metro seemed to agree, but Metro never produced any evidence that it had maintained the roof, although the City requested such documentation.

21. The City agreed to replace Metro’s roof in accordance with a recommendation that Metro’s roof consultant identified as “Strategy 1 – Roof Overlay”. In 2019, the City entered into a contract for that work with a total project cost of $660,000. The “Roof Overlay” strategy does not involve the structure of the Metro grocery store building, it is a replacement of the roof membrane and some insulation, but the existing roof deck is not exposed.

22. The City took steps to repair the Metro roof in the mistaken belief that the City was obliged to do so under the Lease. The City now understand that Metro, and not the City, bears that responsibility, under Article XIV of the Lease. Metro produced correspondence that demonstrates that La Prima repaired the Metro roof but charged the cost back to Metro as a tenant expense.

[11] Finally, below are the following, in the order in which they were discussed by counsel in their oral submissions at Court on the hearing of both Applications, all potentially relevant to the issues raised in the Counter-Application:

i) the definition of “Common Facilities” in the Original Lease (page 41 of the City’s Application Record dated November 6, 2019);

ii) the definition of “Leased Premises” in the Original Lease (page 42 of the same Record);

iii) the definition of “Shopping Centre” in the Original Lease, including Schedule “A” referred to therein (pages 42 and 79 of the same Record);

iv) the definition of “Store” in the Original Lease (page 42 of the same Record);

v) section 6(6) of the Original Lease (page 50 of the same Record);

vi) section 2(2) of the Original Lease (page 44 of the same Record);

vii) section 14(1) of the Original Lease (page 60 of the same Record);

viii) section 15(1) of the Original Lease (page 61 of the same Record);

ix) section 17(4) of the Original Lease (page 63 of the same Record); and

x) section 11(1) of the Original Lease (page 57 of the same Record).

“Common Facilities” means the areas, facilities and utilities as the same from time to time may be altered, reconstructed or expanded, furnished, made available and maintained by the Landlord in the Shopping Centre for the use and enjoyment in common of the Tenant, the Landlord and all other occupants of the Shopping Centre including their respective officer, agents, employees, customers, invitees and licencees and, without restricting the generality of the foregoing, comprising the Parking Facilities, access roads, driveways, entrances and exists, [sic], sidewalks, malls, enclosed malls, ramps, landscaped areas, interior and exterior stairways, escalators, elevators, passageways, first-aid stations and comfort stations (if any).

“Leased Premises” means

(i) until the Occupation Date, an undivided interest in and to the Shopping Centre, and

(ii) from and after the Occupation Date, the Store and the land subjacent thereto,

“Shopping Centre” means the lands and premises described in Schedule “A” and shown on Schedule “B” and, provided same are contiguous thereto, every enlargement of the said lands and premises and every addition thereto and any amendment thereof, and includes the Common Facilities and all other buildings, structures, improvements, fixtures, mechanical, sprinkler and electrical equipment and machinery, water, gas, sewage, telephone and other communication facilities, and electrical power services and utilities comprised therein, belonging thereto, connected therewith or used in the operation thereof, and now or hereafter constructed, erected, and installed therein and thereon.

SCHEDULE A

FIRSTLY:

ALL AND SINGULAR that certain parcel or tract of land and premises situate, lying and being in the City of Orillia, in the County of Simcoe and being composed of Lots 7 to 11 inclusive, and part of Lots 5 and 6, on the east side of Front Street, according to registered Plan Number 8, and part of the Water Lot in front of Lot 8, Concession 5, in the City of Orillia, which lands are designated as PARTS 1, 2 and 5 on a plan of reference filed in the Land Registry Office for the Land Registry Division of Simcoe (No.51) as Reference Plan 51R-7773.

SECONDLY:

ALL AND SINGULAR that certain parcel or tract of land and premises situate, lying and being in the City of Orillia, in the County of Simcoe and being composed of part of the Water Lot in front of Lot 8, Concession 5, in the City of Orillia, which lands are designated as PART 3 on a plan of reference filed in the Land Registry Office for the Land Registry Division of Simcoe (No. 51) as Reference Plan 51R-7773.

“Store” means the building within the area outlined in RED in Schedule “B” as such building from time to time may be altered, reconstructed or expanded pursuant to this lease, and includes all mechanical, sprinkler and electrical equipment and machinery comprised in the Store for the exclusive use of the Store.

LEASEHOLD TITLE

6.(6) The Tenant acknowledges that the leasehold interest of the Landlord in that portion of the Shopping Centre Secondly described in Schedule “A” pursuant to a lease dated July 12, 1978 and registered in the Land Registry Office for the Land Registry Division of Simcoe on August 14, 1978 as Instrument No. 645637 as amended by an agreement dated November 16, 1978 expires on July 14, 1993 or such earlier date as provided in the said lease. The Landlord agrees to acquire ownership of the demised lands if permitted or entitled to so do under the terms of the said lease to maintain the said lease in good standing, and to exercise each right of renewal thereof that falls within the Term.

COMMON FACILITIES

2.(2) As an essential term and condition of this lease, fundamental to the execution and delivery of this lease by the Tenant, the Tenant, together with and in common with the Landlord and all other occupants of the Shopping Centre including their respective officers, agents, employees, customers, invitees and licencees, shall be entitled to the continued use, enjoyment and benefit of the Common Facilities in accordance with the provisions of this lease.

TENANT’S OBLIGATION

14. (1) The Tenant covenants that from and after the earlier of the Occupation Date or the date on which the Tenant accepts possession of the Store and opens the Store for business to the public

a) The Tenant shall maintain and repair the Leased Premises,

b) During the hours when the Leased Premises are open for business the Landlord may enter and view the state of repair, and

c) The Tenant shall repair the Leased Premises according to notice in writing.

LANDLORD’S OBLIGATIONS

15. (1) Subject to Article XIV, the Landlord shall

a) keep or cause all buildings and improvements in the Shopping Centre and the Common Facilities to be kept in good repair and in a clean, orderly and safe condition (both inside and outside), and

b) in a good and workmanlike manner promptly do all such work and make or cause to be made all necessary repairs, make all necessary rebuildings and replacements (structural or otherwise), ordinary as well as extraordinary, and foreseen as well as unforeseen, including all such repairs, rebuildings and replacements which as a prudent owner thereof it should do or make to properly maintain and operate all buildings and improvements in the Shopping Centre and the Common Facilities.

APPLICATION OF PROCEEDS OF INSURANCE

17.(4) All proceeds of insurance maintained by the Tenant under section 17(1)(a) or (b) shall be adjusted by and paid to the Tenant and the Tenant shall apply such proceeds to repair the injury with respect to which such proceeds are payable. All proceeds of insurance maintained by the Landlord under section 17(2) (a) or (b) shall be adjusted by and paid to the Landlord and the Landlord shall apply such proceeds to repair the injury with respect to which such proceeds are payable.

GENERALLY

11. (1) The Landlord covenants that the Common Facilities shall at all times be available within the Shopping Centre and shall be suitable and adequate for use in the conduct of business in the Shopping Centre by the Tenant in accordance with Article IX and of all other lessees of premises in the Shopping Centre and their respective officers, agents, employees, customers, invitees and licencees.

The Issues to be Decided

The Law

[12] Before framing the questions to be decided by this Court, let us examine the law. There is no dispute between the parties, and I agree, that this case is all about contractual interpretation. There is also no dispute about the governing law; where the parties separate, and what this case turns on, is the application of the legal principles to the facts.

[13] A leading authority on the law regarding the interpretation of commercial contracts is the decision of the Court of Appeal for Ontario in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, 2010 CarswellOnt 7643. Particularly instructive is paragraph 16 of that decision, set out below.

The basic principles of commercial contractual interpretation may be summarized as follows. When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity. Where a transaction involves the execution of several documents that form parts of a larger composite whole—like a complex commercial transaction—and each agreement is entered into on the faith of the others being executed, then assistance in the interpretation of one agreement may be drawn from the related agreements. See 3869130 Canada Inc. v. I.C.B. Distributing Inc. (2008), 2008 ONCA 396, 66 C.C.E.L. (3d) 89 (Ont. C.A.), at paras. 30-34; Drumbrell v. The Regional Group of Companies Inc. (2007), 2007 ONCA 59, 85 O.R. (3d) 616 (C.A.), at paras. 47-56; SimEx Inc. v. IMAX Corp. (2005), 2005 CanLII 46629 (ON CA), 11 B.L.R. (4th) 214 (Ont. C.A.), at paras. 19-23; Kentucky Fried Chicken Canada v. Scott’s Food Service Inc. (1998), 1998 CanLII 4427 (ON CA), 41 B.L.R. (2d) 42 (Ont. C.A.), at paras. 24-27; and Professor John D. McCamus, The Law of Contracts (Toronto: Irwin Law Inc., 2005), at pp. 705-722.

[14] There is a cautionary note, however, about whether an ambiguity exists in the contract under review. Fairly recently, the Court of Appeal for Ontario reminded us of that in its decision in Amberger v. IBM Canada Ltd., 2018 ONCA 571, 2018 CarswellOnt 10197, at paragraph 63.

In my view, there is no ambiguity. As stated by Laskin J.A. in Chilton v. Co-Operators General Insurance Co. (1997), 1997 CanLII 765 (ON CA), 32 O.R. 161 (C.A.), at p. 169, “[t]he court should not strain to create an ambiguity where none exists.” In my view, the motion judge strained to create an ambiguity where none exists.

[15] In Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, 2014 CarswellBC 2267, at paragraphs 59 and 60, the Supreme Court of Canada clarified the relationship between (i) the role of surrounding circumstances in contractual interpretation and (ii) the parol evidence rule.

It is necessary to say a word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing (King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129, at paras. 54-59, per Iacobucci J.). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., 1993 CanLII 88 (SCC), [1993] 2 S.C.R. 316, at pp. 341-42, per Sopinka J.).

The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.

[16] Orillia has also brought this Court’s attention to the decision of Justice Ground of the Ontario Superior Court of Justice in Mifsud v. Owens Corning Canada Inc., 2003 CarswellOnt 3823. At paragraphs 11 and 14 therein, Ground J. discusses the contrast between a latent ambiguity and a patent ambiguity, in the context of contractual interpretation.

11. In Hamilton Conservation Authority v. Eaton, [1974] O.J. No. 644 (Ont. H.C.), the court admitted evidence of the intention of the parties as to the meaning of the term “steel warehouse”. The evidence before the court seems to be that there were at least three structures on the property which could be described as a steel warehouse. Although the court described this as a patent ambiguity, I regard this case as coming within the latent ambiguity exception to the principal of objective interpretation of a contract. The phrase “steel warehouse” is not on its face patently ambiguous or susceptible of more than one interpretation and the ambiguity only became apparent from a consideration of the surrounding circumstances or the factual matrix which established that there were at least three structures which could be described as a “steel warehouse”.

12. I must conclude, therefore that the position of the Respondent is correct, that the only exception to the well established principle that evidence of subjective intention of the parties to a written contract is not admissible is where the contract is not ambiguous on its face but, when the court considers the surrounding circumstances or factual matrix, it becomes apparent that there is a latent ambiguity and accordingly, the court may admit evidence of the parties’ intention as to which of two or more alternative subjects the parties intended to refer to. This is not the case at bar. The wording of Section 1 of the 1985 Agreement is on its face susceptible of more than one interpretation and is accordingly, patently ambiguous. The weight of authority in this province in my view, supports the position of the Respondent that, in that situation, the court may consider the surrounding circumstances or factual matrix but if that does not resolve the ambiguity, the court must then consider objectively what reasonable persons would have meant by the word used and may not admit evidence of the subjective intention of the parties.

The Application

[17] The issue to be decided on the Application is as follows: does the lease agreement between Orillia and Metro expire, at the latest, on February 28, 2029 or on February 28, 2039?

The Counter-Application

[18] The issues to be decided on the Counter-Application are as follows:

i) is the City obligated to replace the roof of the Metro grocery store at 70 Front Street North in Orillia;

ii) is the City obligated to replace the parking lot at the plaza at 70 Front Street North in Orillia; and

iii) should the City be permanently enjoined from restricting Metro’s access to the Triangle Land?

[19] The Triangle Land is best understood by examining the survey document at tab 4, page 88 of Metro’s Application Record dated October 28, 2019 – the Part 3, outlined in blue.

The Positions of the Parties

Orillia

[20] On the Application, the City’s position, as reflected in both the written and oral submissions by its counsel, may be summarized as follows:

i) the lease expires, at the latest, on February 28, 2029;

ii) there is no ambiguity here – there is only one reasonable interpretation of the term and renewal provisions in the Original Lease and the Lease Amending Agreement; and

iii) as such, there is no need to, nor would it be appropriate to, resort to extrinsic evidence.

[21] Alternatively, the City argues that if there is an ambiguity, it is a patent one (that is, on the face of the lease documents), and thus, extrinsic evidence of the subjective intention of the parties is not admissible.

[22] In the further alternative, the City submits that if the extrinsic evidence relied upon by Metro is admissible, then it is not very probative and certainly not conclusive, leaving Orillia’s position on the maximum potential duration of the lease between the parties as being the correct one.

[23] On the Counter-Application, the City submits the following:

i) whether we use the word “repair” or “replace”, the roof of the Metro grocery store is the responsibility of Metro, especially when one considers that the tenant is the beneficiary of a fixed rental rate for 50 years; there is, thus, no requirement that Orillia replace the roof;

ii) there is similarly no requirement that the City replace the parking lot at the plaza, as the City has already addressed the situation through repair work, and there have been no complaints since, and the standard has been met in that the parking lot is “suitable and adequate for use” within the meaning of section 11(1) of the Original Lease; and

iii) a permanent injunction is not appropriate here because the City completely controls the “Common Facilities” which term includes the Triangle Land, and Metro has no leasehold interest in the Triangle Land so as to permit it to apply for an injunction, and an injunction is unnecessary in any event because what the City wants to do will not impair Metro’s access to the Triangle Land.

Metro

[24] On the Application, Metro’s position, as reflected in both the written and oral submissions by its counsel, may be summarized as follows:

i) the lease expires, at the latest, on February 28, 2039;

ii) there is ambiguity here, especially when one considers the factual matrix along with the provisions of the Original Lease and the Lease Amending Agreement; and

iii) in the face of that ambiguity, extrinsic evidence ought to be examined, and when one does so one finds that the weight of the evidence supports Metro’s position.

[25] On the Counter-Application, Metro submits the following:

i) everyone agreed, at least until recently, that the roof needed to be replaced, and the provisions of the Original Lease, particularly sections 14(1) and 15(1), distinguish between Metro’s liability to “repair” and the landlord’s responsibility to “replace”, and thus, Orillia is obligated to replace the roof of the Metro grocery store;

ii) likewise, Orillia is also contractually required to replace the parking lot at the plaza as the repairs that it had done already (known as a mill and overlay procedure) were ineffective and were not what was recommended by the experts; and

iii) a permanent injunction is appropriate to ensure that Metro can continue to access the Triangle Land to deliver and pick-up loads at the rear of the grocery store, and various provisions of the Original Lease [section 6(6), and Schedule “A”, and section 2(2), and the definition of “Common Facilities”] all suggest that the Triangle Land is part of the “Shopping Centre”, and Metro does have a leasehold interest in the Triangle Land, and the City has not complied with section 6(6) of the Original Lease.

[26] As to whether the injunction is necessary, Metro points to evidence that it says makes the issue very important. Based on certain comments of Ian Sugden, a City official, during an out-of-court examination, Metro is worried that Orillia will take away Metro’s access to the Triangle Land altogether.

II. Analysis

The Application

[27] For the reasons that follow, I agree with the position of Metro. I conclude that the lease between the parties expires, at the latest, on February 28, 2039. Hence, I dismiss the City’s Application.

[28] Despite the very able submissions of Mr. Wood, I find that there is indeed a clear ambiguity as to the maximum potential length of the lease.

[29] For the convenience of the reader, I set out here, again, sections 3(1), 3(2), and 3(3) of the Original Lease, which can be found at page 45 of the City’s Application Record dated November 6, 2019, and sections 2 and 3 of the Lease Amending Agreement, which can be found at page 88 of the same Record.

INITIAL TERM

3.(1) TO HAVE AND TO HOLD the Leased Premises for and during a period of 25 years and nil months commencing on the first day of March, 1979, reserving unto the Landlord the right to enter upon the Leased Premises from the date of this lease until the Occupation Date for the purpose of constructing the Store and all other buildings and improvements in the Shopping Centre in accordance with this lease.

RENEWALS

3. (2) The Tenant shall have the options to renew this lease for 5 successive renewal periods of 5 years each. Each such option shall be deemed to have been exercised by the Tenant unless within the period of 12 months prior to the date on which the Term, except for any subsequent renewal under this section 3(2) would otherwise expire the Tenant has given notice to the Landlord that it has elected not to renew this lease. Each such renewal shall be at the Minimum Rent and shall otherwise be subject to the same covenants, obligations and agreements and be upon the same terms and conditions as contained in this lease except for any right of extension or renewal beyond the last such renewal.

MAXIMUM TERM

3. (3) If the exercise of an option to renew shall result in the Term exceeding a period of 50 years, then notwithstanding the provisions of section 3(2), the Term shall expire on that date which is 50 years after the date which is the earlier of the Occupation Date or the commencement date of the Term.

4. TERM

The term of the Lease is extended from the date that it would otherwise expire for a further term of ten (ten) years commencing March 1, 2004 and expiring on February 28, 2014.

3. RENEWAL

The Tenant has the option to further extend the term of the Lease for three (3) additional periods of five (5) years each, for a total of five (5) options or twenty-five years, if all remaining options are exercised. The Tenant may exercise its options in the same manner as provided in the Lease.

[30] Looking at those provisions, I find that there are two reasonable interpretations that may be afforded in these circumstances.

[31] One is that the maximum 50-year term of the Original Lease was not altered by the Lease Amending Agreement. Rather, section 2 of the Lease Amending Agreement is simply a reflection of the fact that Metro exercised two 5-year renewal options. That left three 5-year renewal options remaining after February 28, 2014, meaning that the lease between the parties would expire no later than 15 years after February 28, 2014, that is, February 28, 2029.

[32] That interpretation favours Orillia’s position.

[33] Metro’s position is also reasonable, however. Given its significant investment in expanding the grocery store around the time of when the Lease Amending Agreement came into existence, Metro wanted to stretch the maximum potential length of the lease as originally contemplated in 1978. That explains section 2 of the Lease Amending Agreement. That section was not a reflection of Metro having exercised two 5-year renewal options but rather an agreement to add 10 years to the maximum potential length of the lease. In other words, there were still 25 years worth of potential renewals after February 28, 2014 (five 5-year periods), as reflected in section 3 of the Lease Amending Agreement, meaning that the lease could expire as late as February 28, 2039.

[34] As to why the Lease Amending Agreement does not expressly vary the maximum 50-year term provision in the Original Lease, a point stressed by counsel for the City, one could reasonably argue, as Metro does, that section 6 of the Lease Amending Agreement, set out again below for the reader’s convenience, addresses that point.

6. EXISTING LEASE

The Lease is amended wherever necessary to give effect to the foregoing and the Landlord and Tenant confirm that the Lease as so amended remains in full force and effect.

[35] It is important to observe that Metro’s significant investment in expanding the grocery store around the time of when the Lease Amending Agreement came into existence is not a recognition that is dependent on any of the extrinsic evidence pointed to by Metro as allegedly supporting its position that the lease expires as late as February 28, 2039 (see paragraph 20 at pages 4 through 6 of Metro’s factum on the Application, dated November 27, 2019). Rather, that recognition comes from a plain reading of the Lease Amending Agreement itself, specifically the preamble and section 1 titled “Expansion of Premises”.

[36] In summary, on the face of the documents themselves, there is an ambiguity that one need not strain to find, and a further inquiry is necessary. It helps nobody for this Court to say that the matter ends in a “draw”.

[37] As alluded to above, relying upon the decision of Justice Ground in Mifsud, supra, the City argues that if there is an ambiguity, it is a patent one, and thus, extrinsic evidence of the subjective intention of the parties is not admissible.

[38] The difficulty here, however, is that the lease documents are patently ambiguous and, in addition to that, an examination of the factual matrix but excluding the extrinsic evidence relied upon by Metro does not adequately resolve the ambiguity.

[39] This is the appropriate time to set out that extrinsic evidence relied upon by Metro, summarized at paragraph 20 of its factum on the Application, dated November 27, 2019 (all references omitted).

The Renewal/Extension Options Could Extend the Lease to 2039

20. Metro has been overt in its position that it has renewal/extension options which could extend the term of the Lease to 2039. For example:

a) Metro’s internal paperwork from the time the Lease Amending Agreement was executed states that the term of the Lease was “25 years + 10 per LAA” and the number of extensions were unchanged from the Original Lease “5x5 yrs…”;

b) the Lease Amending Agreement was registered on title to 70 Front on January 14, 2004 (which Mr. Sugden agreed would be an appropriate time to have registered the Lease Amending Agreement on title) and stated:

The Tenant has the option to extend the term of the lease from February 28, 2014 for five (5) renewal periods of five (5) years each, for a total of twenty-five (25) years of renewal term, if all renewal options are exercised.

c) Metro’s memorandum dated July 11, 2007 for the remodel of the Leased Premises stated that the Lease expired on February 28, 2014 and had “5 x 5 year options” to renew/extend the term of the Lease. Metro spent approximately $2.364 million on the remodel in or around 2008.

d) Metro executed an estoppel certificate on or about March 17, 2011 for La Prima Investment’s financing purposes and described the renewal/extension options as follows:

The expiry date for the termination of the current term of the Lease is the 28th of February, 2014, the Tenant not being entitled to any renewals of the term of the Lease, other than the following:

5 extension options of 5 years each.

e) during negotiations in 2015 between Metro and Orillia regarding Metro’s potential purchase of a portion of 70 Front (including the Leased Premises and parking surrounding the Leased Premises), Metro’s in-house legal counsel summarized the renewal/extension options as follows:

Metro’s position continues to be that beyond the current term (running to February 28, 2019), there are four (4) remaining extension options of five (5) years each which, if exercised, would run to February 28, 2039.

This summary was provided to Orillia’s representatives on or about April 17, 2015.

f) Metro executed an estoppel certificate on or about January 20, 2016 directed to La Prima Investments and Orillia (the “2016 Estoppel Certificate”) which stated that the lease had five extension/renewal options with the “Fifth Extension Period” running from “March 1, 2024 to February 28, 2039”.

g) On or about January 21, 2016, Orillia took the position that the 2016 Estoppel Certificate “caused concern” and, in response, a representative of Metro stated that Metro’s “position on the number of remaining options has never changed”.

[40] If this Court refuses to consider any of the above “evidence”, then there will remain no satisfactory answer to the issue at hand. Why not? Because the rest of the factual matrix supports both sides’ positions on the maximum potential expiration date of the lease, and equally so.

[41] For example, in 1999/2000, Metro poured about 3.5 million dollars into an expansion of the grocery store. Further, it bound itself to a fixed 10-year term, instead of having the luxury of two 5-year renewal options, by virtue of section 2 of the Lease Amending Agreement. Those parts of the factual matrix tend to support Metro’s position that there was an extension of the maximum potential lease term until February 28, 2039.

[42] On the other hand, Metro’s investment in the grocery store was aided by its receipt of substantial financing from the landlord, to the tune of about $672,000.00. And the other side of the “coin” (the “coin” being section 2 of the Lease Amending Agreement) is that the City was locked-in to having Metro as its tenant until at least February 28, 2014. Those things tend to support Orillia’s position on the maximum potential lease term.

[43] The ambiguity remains, and yet the City asks that this Court ignore the extrinsic evidence relied upon by Metro, in the absence of anything of a countervailing nature pointed to by Orillia. Is that reasonable? I do not think so.

[44] I do not quarrel with the decision of Justice Ground, but I think that the problem with the City’s position is that it assumes that the extrinsic evidence relied upon by Metro is all self-serving “evidence of the subjective intention of the parties”. Some of it is nothing but that, namely, internal documents created by unknown persons associated with Metro and used exclusively by Metro.

[45] But the document at tab 10 of Metro’s Application Record dated October 28, 2019 is an important exception. That official Notice of Lease was registered on title. It was registered on January 14, 2004, precisely when it would reasonably have been registered given section 2 of the Lease Amending Agreement. It was effective notice to everyone, including the then landlord whose particulars were outlined in the document’s Schedule, of what was meant by the provisions of the Lease Amending Agreement. In that Schedule, it is stated clearly and unequivocally that the lease could be extended, at the option of the tenant, for as many as 25 years from February 28, 2014, taking us to February 28, 2039.

[46] The other important exception is the document at tab 12 of Metro’s Application Record dated October 28, 2019. That official Estoppel Certificate was certification for not just the lender (Laurentian Bank of Canada) but also for the landlord itself, as made clear in the preamble on the first page. On the second page of the document, at clause 6, it is made abundantly clear that the lease expires on February 28, 2039 (“5 extension options of 5 years each” after the expiration of the “current term” on February 28, 2014).

[47] Those two documents, in particular, I would not at all describe as being simply self-serving statements of the subjective intention of Metro. Yes, we have to be cautious about after-the-fact conduct in the arena of contractual interpretation. We should consider:

i) the temporal proximity of the conduct in question vis a vis the contract (strong for the Notice of Lease but far less so for the Estoppel Certificate);

ii) the certainty or unequivocal nature of the evidence, or lack thereof (very strong for both documents);

iii) whose conduct it was (Metro’s, in both instances);

iv) whether the conduct shows a consistent pattern of the party’s intention (yes indeed);

v) whether the conduct was intentional (yes); and

vi) whether the conduct was mutual (not really, though the Notice of Lease was a public registration on title that referred specifically to the then landlord and which was effective notice to anyone interested, and the Estoppel Certificate was for the actual benefit of the then landlord), among other factors.

Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912.

[48] In all of the circumstances, I have no hesitation in admitting the evidence of the two documents in question. I find them to be probative and reliable and enough to tip the balance in favour of a finding supportive of Metro’s position, regardless of the other extrinsic evidence relied upon by Metro.

[49] I am comforted in that conclusion by some basic commercial common sense. I find it unreasonable, overall, to think that Metro would embark upon such a sizeable expansion of its grocery store, and a significant financing campaign to achieve that, without getting in return the certainty of some extra years as a flagship tenant in that plaza in Orillia.

The Counter-Application

[50] For the reasons that follow, I agree with Orillia’s position on the three issues under this heading. The Counter-Application is therefore dismissed.

[51] My reasons for decision on the Counter-Application are much more succinct in comparison to those related to the Application. That is a reflection of what these very competent counsel know already. Measured by both the written and the oral submissions delivered, far more time and energy were devoted by the parties to the singular issue of the maximum potential length of the lease as compared to the three issues, even collectively, on the Counter-Application.

[52] Regarding the roof, I do not see it as fatal to the City’s position that it appears to have agreed in the past that the roof of the grocery store needed to be replaced and, in fact, took steps to pay for that by budgeting money for the expense. This is not a case where the claimant is relying upon some equitable remedy, but rather Metro is content to have the matter decided strictly on the basis of contract law.

[53] Looking at the Original Lease as a whole, paying special attention to the sections relied upon by Metro, 14(1) and 15(1), I am not persuaded, despite the quite able arguments by Ms. Chaytor, that the landlord has any duty to replace the roof. To the contrary, it seems to me that clause (a) of section 14(1) suggests that Metro must maintain and repair the “Leased Premises”, which term would include the roof. I do not think that there is any legitimate basis to distinguish that clause because it says “repair” instead of “replace”.

[54] On the parking lot, likewise, I do not see it as fatal to the City’s position that it appears to have agreed in the past that something more than a mill and overlay procedure was recommended and then went ahead and did exactly that, nor do I consider it determinative that Orillia appears to have previously budgeted substantial money to replace the parking lot.

[55] I agree with Mr. Wood. The evidence establishes that the parking lot was in bad shape. Repairs were made. Those repairs improved the situation significantly, at least to the point of bringing the lot within the meaning of being “suitable and adequate for use”, which is all that the Original Lease requires, and, but for a single reference at one paragraph of an affidavit filed on behalf of Metro (which may or may not have been completely informed of the work that the City had already done), there have been no complaints about the parking lot since.

[56] On the major issue under this heading, that involving The Triangle Land, I agree with Ms. Chaytor that the evidence demonstrates that Orillia has failed to comply with section 6(6) of the Original Lease, set out below, again, for the convenience of the reader.

6.(6) The Tenant acknowledges that the leasehold interest of the Landlord in that portion of the Shopping Centre Secondly described in Schedule “A” pursuant to a lease dated July 12, 1978 and registered in the Land Registry Office for the Land Registry Division of Simcoe on August 14, 1978 as Instrument No. 645637 as amended by an agreement dated November 16, 1978 expires on July 14, 1993 or such earlier date as provided in the said lease. The Landlord agrees to acquire ownership of the demised lands if permitted or entitled to so do under the terms of the said lease to maintain the said lease in good standing, and to exercise each right of renewal thereof that falls within the Term.

[57] The City acknowledges that, after the then landlord’s leasehold interest of the Triangle Land expired on July 14, 1993, that landlord continued to lease the Triangle Land, on a year-to-year basis. The City, as the new landlord, did so as well right up until 2019 when it chose (voluntarily) to terminate the lease of the Triangle Land, thereby effectively removing the Triangle Land from the definition of “Shopping Centre” as set out in the Original Lease.

[58] In doing so, I find that the City breached its contractual obligation owed to Metro, under section 6(6) of the Original Lease. Orillia failed to “maintain the said lease in good standing”.

[59] But this is not a claim by Metro for specific performance of a contractual obligation, nor is it a claim for monetary damages, nor is it a claim couched in anything other than a request for a permanent injunction. Currently, Metro has no standing to obtain that serious remedy. Today, it has no recognizable property interest, whether as owner or renter or lessee or something else, in the Triangle Land.

[60] Further, even if I was persuaded that Metro could, in law, assert its claim for a permanent injunction, I would not have granted it. I agree with Mr. Wood that such a serious remedy is, at a minimum, premature. There is insufficient evidence, in fact next to no evidence at all, that what the City intends to do with the proposed cul-de-sac at Neywash Street will impede/restrict/impair Metro’s access to and over the Triangle Land. The comments by Mr. Sugden, though understandably concerning to Metro, cannot ground the issuance of a permanent injunction at this time.

III. Conclusion

[61] I am very grateful to counsel for their hard work and thoughtful presentation of the issues involved in both Applications.

[62] Orillia’s Application is dismissed. This Court declares that the lease between the parties expires on or before February 28, 2039, depending on whether all or some of the options to renew are exercised by the tenant, Metro.

[63] Metro’s Counter-Application is dismissed. The City is not required to replace the roof, or to replace the parking lot, and no permanent injunction is issued with regard to the Triangle Land.

[64] It could be argued that success has been divided and, thus, no costs ought to be awarded. If the parties, wish, however, failing an agreement on costs, I will receive written submissions. Any side seeking costs shall file within 30 calendar days of the date of these Reasons. The responding party shall file within 15 calendar days of receipt of those submissions. There shall be no reply permitted by either side, except with leave of the Court. Each submission shall be limited to three pages, excluding attachments.

(Original signed by)

Conlan J.

Released: December 20, 2019